American Express launches new credit card offering cashback on spending and no interest for 16 months

American Express has revamped its Platinum Cashback credit card, offering cardholders 1.25 per cent on their spending and 16 months of interest free purchases.

With many providers concentrating their efforts on attractive balance transfer deals, it is good news for households looking for a little extra from their spending, particularly with no interest to eat away at potential earnings.

The lure of free cash might be a tempting, but is the new American Express card worth signing up to? This is Money takes a closer look.

Added perks: American Express has launched a new credit card offering 0 per cent on purchases for 16 months as well as 1.25 per cent cashback on your spending.

HOW DO CASHBACK CARDS ACTUALLY WORK?

Cashback credit card deals offer to repay a percentage of your spending back to you. This money is usually calculated annually and then deposited into your account.

Some
providers offer an attractive rate boost, usually around 5 per cent for the
first few months, during the anniversary month of when you first took out the card, or on certain types of spending.

After
that rates usually fall, normally to between 1 per cent or 2 per cent. Although
the earning potential is not huge, if you tend to use a credit card for most day-to-day spending, it might provide a nice surprise boost.

However, they are not for everyone. Cashback credit cards often come with annual fees or
restrictions on how much you must spend – meaning
they are only worthwhile for big credit card spenders.

These cards are designed to make you spend more. But with
interest rates typically set at 18 or 19 per cent, if you can’t clear the
balance each month you might end up handing over more in interest than
you make in cashback.

A cashback card is also usually not the best option for households with a bad credit history

What is American Express offering?

New cashback credit card deals coming to the market are always good news for those looking to get a little extra back on their everyday spending. But the real draw of the new Amex card is the addition of a 0 per cent purchase deal.

This prevents cardholders from falling into the trap where the interest on their spending outweighs any gains made from cashback.

Each year during the anniversary month of when the card was taken out, Amex will also pays double the interest rate - 2.5 per cent. However, to be eligible for this bumper offer, you must have spent £10,001 on the card during the previous 12 months- or £834 each month.

The Platinum Cashback card has an annual £25 fee, which means a monthly spend of £1,000 on the card could earn you £125 over the year, after the £25 annual fee.

Those charging £500 to the card each month would get £50 after the fee.

In the second year, spending £1,000 a month would earn you
£137.50 a year, including the anniversary month rate boost.

Cardholders can also apply for extra cards for free for family
members to help maximise cashback earnings. Any earnings will be paid into your account once a year. There are no maximum or minimum cashback payments.

A little extra: To make the most of a cashback or rewards you will need to make sure any interest does not outweigh potential earnings

What about the purchase offer?

As well as the lure of 'free' money, this could be an attractive option for those simply looking for a card with a 0 per cent purchase deal.

Longer interest free purchase terms are good for those looking to make a large purchase and spread the
repayments.

But the important thing is that it stops any cashback you
earn on the Amex card from being cancelled out by interest charges if you cannot clear the balance
on the card each month.

The
card has no limits on the amount you can earn but it comes with a
standard interest rate of 18.7 per cent. Therefore you will need to make
sure you have cleared any debt built up on purchase before the end of
the first 16 months.

You are also eligible for travel
accident insurance for up to £150,000 on public transport when you buy
your ticket with your card.

So what are the drawbacks?

Remember you will need to be careful –
although you have 16 months without interest charges you will want to pay off as
much of your balance as possible each month.

Otherwise
you risk ending up with debt left on the card once the purchase period
is over - which will be charged at a hefty interest rate of 14 per cent. The standard APR reaches 18.7 per cent once you have taken the £25 annual fee into account.

You will also have to consider that in many places American Express cards are not actually accepted, which could limit the amount of money you could make in cashback.

To apply you must have ahousehold income of at least £20,000 and the provider also specifies that it does not accept those with a bad credit history.

It's worth considering the Santander 123 card,which pays 1 per cent on supermarket
spends, 2 per cent at major department stores and 3 per cent on
fuel, National Rail and TFL travel, but has a £300 a month cap.

But,
remember, as these are all popular cards, you are likely to find that
your application is not accepted if you have a poor credit rating.

Representative example: If you spend £200 at a purchase interest rate of 18.9% p.a. (variable) your representative rate will be 18.9% APR (variable). Credit limits and terms may vary based on your individual circumstances. Balance transfer offers and introductory fees limited to transfer made with 60/90 days of account opening. See product specific T&Cs. * must spend £1k within 3 months

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